Apple, Samsung Supplier Affected By New COVID-19 Restrictions In China

Following the rise in the number of COVID-19 cases in the Chinese tech hub of Shenzhen, authorities have called for a partial lockdown in Shenzhen and several other regions to contain the country’s worst Covid-19 outbreak in two years. As a result of the spiking in numbers businesses that offer non-essential services have been ordered to suspend operations or implement work-from-home policies. The Chinese government have announced that everyone in the city will be tested for COVID-19. The city of about a 17million residents on Sunday reported about 60 new COVID-19 cases. The partial lockdown will see that Foxconn and other tech manufacturers suspend operations.

Foxconn is a Taiwanese company that has become the world’s biggest contract manufacturer of electronics. The company has become the most important supplier to companies including Apple and Samsung. Foxconn has two major campuses in Shenzhen, asides from Foxconn, many Chinese tech giants are headquartered in Shenzhen, and these tech giants include Huawei, Tencent, and Oppo, which happen to be located on the southern side of Shenzhen and close to the Hong Kong border. Foxconn has decided to follow the new directives and has called for a halt in its production facility at Longhua and Guanlan until further notice. According to reports, the Shenzhen base is Foxconn’s second-largest.

China has called for a partial lockdown in Shenzhen in a bid to limit the spread of the deadly virus that once put the world on a standstill for months in the year 2020. Since the pandemic began, the country has reported a total of 115,466 confirmed cases and 4,636 deaths. Shanghai, which is the most populous city in China and home to major chipmaker SMIC, has also moved into action as it plans to enact new restrictions starting today. Means of transportation to other provinces has now been suspended, for anyone attempting to leave or enter the city a negative PCR test is ultimately required. On Sunday, 64 new COVID-19 cases were reported in Shanghai.

According to CNN Reports, the lockdowns in Shenzhen and other major Chinese cities have been projected will impact not just the country’s post-pandemic recovery, but could deliver a new blow to global supply chains. Shenzhen is o home to one of the largest container ports in the world. A simple disruption in that port could hit negatively on an already stressed out global supply chain. Shares in Taipei-based Foxconn Interconnect Technology, a subsidiary of Foxconn, has plunged by 9.8% in Hong Kong on Monday. Shares of major companies based in Shenzhen fared poorly in Hong Kong on Monday. Tencent sank 9.8%. Telecoms firm lost 7%. BYD China’s largest electric car manufacturer, fell 8.3%. And AAC Technologies an audio components maker, plunged 9%. These stringent measures taken to control the pandemic have hit China’s economy hard in recent times. Earlier this month, the government set an economic growth target at around 5.5% for 2022, the lowest official goal in decades.

Foxconn has disclosed that dates for resumption of its company’s operation “is to be advised by the local government.” In a bid to minimize the potential impact of the production halt on business and manage commitment to suppliers, the Taiwanese company has “adjusted” its production line to other sites. The company however didn’t elaborate on which locations would take on extra work.